Off the Charts: Examining Musicians' Income from Sound Recordings

Whether on vinyl, cassette, CD or via digital download, income from the sale, license or performance of sound recordings has been a core part of many musicians’ income streams for decades. But there’s no doubt that income from sound recordings — perhaps more than any other — has experienced significant challenges and undergone serious changes in the past 10 to 15 years.

While the existing music marketplace was fundamentally disrupted by peer to peer filesharing, we have also seen the decline of brick and mortar stores, and the development of legitimate download stores like iTunes and Amazon, and licensed subscription services like Rhapsody and Spotify. We’ve also seen the rapid growth in a new revenue stream for sound recordings — the digital performance royalties that are generated when sound recordings are streamed on any webcast service like Pandora or played on sateliite radio.

Given the drastic changes in the sound recording landscape in the past ten years, we wanted to ask musicians — how has your income from sound recordings changed?

Today marks the release of another report from FMC’s Artist Revenue Streams project, a multi-method, cross-genre, examination of musicians’ revenue streams. Drawing on information collected through in-person interviews with musicians and managers, financial case studies, and the enormous pile of data gathered through last fall’s Money from Music survey, today’s report — Off the Charts — focuses specifically on the changes to income from sound recordings.

When people think of “sound recordings” they may incorrectly assume that term is synonymous with “CDs, LPs & digital downloads.” For the purpose of this research, we mean something more precise. It’s important to remember that a recorded piece of music embodies two copyrights: there’s the copyright for the composition (the lyrics and notes), and a separate copyright for the sound recording (what gets captured in the studio). There are separate revenue streams earned by these two copyrights; the composition earns mechanical royalties when it is licensed for reproduction. The composition also earns public performance royalties when it’s performed publicly or played on the radio. You can see all 42 Streams, organized into categories, here.

Knowing that US copyright law and business practice treats compositions and sound recordings differently, we were careful to structure the survey to make a distinction. We have data about income from mechanicals and PRO royalties, but that’s not what’s included in this report.

This one focuses specifically on the money that sound recordings can earn when they are sold, licensed or performed. This includes: *

Income from physical retail sales (brick and mortar, Amazon, mailorder)

Income from digital sales (iTunes, Amazon MP3, Bandcamp)

Income from sales of recorded music at shows/merch table

Interactive streaming services (Spotify, Rhapsody, Slacker)

Digital performance royalties (Pandora, Sirius XM, via SoundExchange)

Master use license for synchs, ringtones, etc.

* We also asked about record label advances, AARC royalties and a variety of AFM and AFTRA fund payments based on the sales or performances of sound recordings, but this data is not included in this report.

The report includes dozens of charts and interviewee quotes that focus specifically on musicians’ income from sound recordings. The data suggests:

For many musicians, the income derived from sound recordings is a small part of their overall revenue pie, and it’s decreasing. Though differences exist by role and/or genre, the survey data suggests that income from sound recordings is a modest slice of most musicians’ income pies — a sentiment also expressed by a number of interviewees.

The sources of income from sound recordings are shifting. The data suggests that income from physical retail sales has been shifting down and that sales at shows holding steady, while income from digital sales, on-demand streaming, synchs and digital performance royalties have been shifting up. But it’s important to note that the survey data can only indicate the direction of change, not the dollar value of change. As one survey respondent so aptly noted, the fact that his income from digital sales was moving in a positive direction does not mean that the income derived from digital sales was greater than that previously earned from physical sales.

Technology has had a significant impact — both good and bad — on the sound recording landscape. Clearly, the traditional mechanisms for selling sound recordings have been severely impacted by unauthorized filesharing facilitated by technology. It has not only cut deeply into the retail sales marketplace, it has also impacted the value of music, and the prices that musicians can charge for recordings. But, technology has also led to an explosion of legal, licensed music services, and given individual musicians the ability to experiment with bundling options and variable pricing in ways that would have been nearly impossible 15 years ago. And, emerging technologies have led to the development of new revenue streams — digital performance royalties, in particular — which is steadily becoming a noticeable source of income for an increasing number of recording artists.

Sound recordings are an income stream of varying relevance, depending on a number of factors. For some musicians, questions about income from sound recordings is not applicable, because selling music is simply not part of their career composition. For others, it is one revenue stream of many. And for others still, income from sound recordings is a shifting puzzle. Faced with the challenges of near ubiquity of recorded music (much of it available for free on the internet), they are using any means possible — technological and otherwise — to extract value from their work, whether it’s limited edition vinyl, variable pricing, or specialty box sets.

Sound recordings are valuable for many musicians, serving as an artifact of creativity that can not only earn money, but be used to leverage other income sources, from live performance money, to merchandise, radio airplay, to synchs. They will remain an important part of the ecosystem for years to come; what will change is the delivery mechanisms, the licensing structures, and the pricing.

Comments

How do you measure the number of people who have just given up on making any money from sound recordings even though they continue to record them? I would think this is very common and that without signficant leading popularity, you have zero hope of making any at all despite how many things uploaded to the great music stores in 'the cloud.'

This is probably an amalgamation of three different populations: (1) those musicians do not participate in the sound recording revenue streams because of their career structure (salaried players, session players, composers, teachers); (2) musicians who are participating, but did not make any money from sound recordings in the *time period* that we were asking about; and (3) musicians who want to participate -- or have in the past -- but have exited the marketplace.

It's impossible to know from this top level data about the reasons why income from sound recordings for a majority of survey respondents is 0%. So, we asked additional questions about recorded music later on in the survey to get at the reasons why certain income streams were changing. About 1000 respondents provided us with this additional information. The top reason given for reduced income from retail sales? "Lower consumer demand". In a few instances in this section -- and also in an open-ended question later in the survey -- musicians mentioned that they had simply stopped making recorded music to sell, which we mention in the report's narrative. More here: http://money.futureofmusic.org/sound-recording-income/6/

Artist Revenue Streams is primarily a benchmarking effort -- we're trying to measure musicians income streams in 2010-2011. To properly measure change -- including the instances of those who have exited the marketplace -- we would need to replicate this work in a couple of years. But we hope this initial work gives musicians, managers and advocates a snapshot of what it's like now, and leads to additional questions about how we should track and evaluate musicians' income streams going forward.